The SEC has filed administrative charges against a stock research firm and its co-founders for allegedly defrauding investors by issuing reports purportedly based on “unbiased” and “not paid for” research when in reality they received thousands of dollars from issuers as a condition to providing each report.
The SEC charged SeeThruEquity LLC and brothers Ajay and Amit Tandon, both New York City residents, with camouflaging payments by charging companies to make a “presentation” at an investor conference in order to receive a research report for free. The company held 25 such conferences between 2012 and 2017, the SEC said.
SeeThru and the Tandons allegedly collected up to several thousand dollars in conference presentation fees per company, and the issuers regularly had input into the substance of the supposedly unbiased research reports, even including the price targets at times.
“There is a clear line between paid advertising and unbiased research coverage, and we allege that SeeThru and its co-founders crossed it to deceive investors and make money,” said Richard R. Best, director of the SEC’s Atlanta Regional Office. “According to our complaint, Ajay Tandon even scalped multiple issuers, further revealing the biased nature of SeeThru’s research reports.”
The Tandons, who formed the limited liability company in 2010, “were compensated handsomely by the covered companies for the research reports they published. In addition, [the] defendants inflated price targets for the companies for which they published research reports and made other false statements and omissions, repeatedly violating both the anti-fraud and anti-touting provisions of the federal securities laws,” the SEC alleged.
The Tandons often instructed SeeThru analysts to use different, higher price targets for covered issuers than those yielded through purported quantitative analysis, and the price targets contained in SeeThru’s reports were typically more than 300 percent above the current trading price of the stock, the agency said.
The SEC further alleged that CEO Ajay Tandon, 41, frequently traded in the same stocks that SeeThru was evaluating despite stating in published interviews and elsewhere that neither the firm nor its principals traded in securities for which they published research.
According to the SEC’s complaint, Tandon also engaged in scalping, which is a form of securities fraud that occurs when a perpetrator makes a stock recommendation to investors and contemporaneously trades against that very recommendation in the open market without adequate disclosure.
The SEC’s complaint, which was filed in federal court in Manhattan, charges Ajay Tandon and SeeThru with violating the antifraud provisions of the federal securities laws. The suit further charges Ajay and Amit Tandon with aiding and abetting the SeeThru violations.
The SEC seeks permanent injunctions that would bar the Tandons and SeeThru from promoting the issuer of any security and disgorgement of ill-gotten gains plus interest plus penalties.